STOCKS
After consolidating through this week, global Equities look like they are bracing for a decline through next week, maybe longer.
The lead was, perhaps, given by the Nifty (10741.35, -177.35, -1.62%) which broke below 10800 yesterday. The Sensex (36472.93, -587.44, -1.59%) can target 35600 by mid-September. That can translate to around 10490 on the Nifty.
The Dow (26252.24, +49.51, +0.19) saw two-way volatility yesterday. It rose to a high of 26389, but was unable to sustain it. With 21-day MA Resistance at 26323, the outlook is bearish for next week towards 25630, or even lower.
Likewise, the DAX (11747.04, -55.81, -0.47%) saw a high of 11853, was unable to rise past the 21-day MA at 11888 and fell back instead. This makes it potentially bearish towards 11200 over the next couple of weeks.
In Asia today, the Shanghai (2887.64, +4.21, +0.15%) continues to trade below the crucial Resistance of 2900, which it was unable to breach yesterday also. Continued failure to break above 2900 over the next couple of days can possibly trigger a decline towards 2700 over the medium term.
The Nikkei (20681.96, +53.95, +0.26%) trades slightly higher as Dollar-Yen (106.55) trades a little higher than yesterday. But, as mentioned, there are Resistances at 20800-21000 and 107 respectively which have to be broken in order for proper bullishness to come in. Else, there will be a danger of a fall towards 20000-19900.
COMMODITIES
Commodities broadly remain weak. Gold and silver looks vulnerable for a fresh fall. Copper remains bearish and is coming closer to a crucial support. Oil has dipped and is likely to move down further in line with our expectation.
Gold (1495) remains below 1500 and looks vulnerable to test 1480-1473. As mentioned yesterday, a strong rise past 1510 is needed to negate the above mentioned fall which looks less probable at the moment.
Similarly, silver (17.01) can test the crucial support level of 16.80 in the near term. A break below it can see the fall extending to 16.60.
Copper (2.56) has dipped and keeps the bearish view intact to test 2.55-2.54. A crucial support is at 2.5250 which has to hold in order to produce a bounce-back to 2.60-2.62 levels. But the price action on the chart leaves the possibility high of copper breaking below 2.5250 and extending the fall to 2.50 and 2.46 in the short term.
Brent (60.06) has dipped in line with our expectation. As mentioned yesterday, we expect Brent to test 59.50-59.30 in the near term.
Similarly, WTI (55.42) can move down to test 55-54.75 on the downside in the coming sessions. A break below 54.75, which looks more likely, can drag WTI further lower to 54.20 and even 53.80 thereafter.
FOREX
Dollar is holding higher and can move up in the near term. Euro lacks strength to rise decisively above 1.11 and looks vulnerable to test 1.1030-1.10. Dollar-Yen and the Euro-Yen continue to trade mixed. Aussie is retaining its sideways range while the Pound has risen past a key resistance and looks bullish for further rise in the short term. USDCNY is coming closer to key resistance which if holds can trigger a corrective fall. The Dollar-Rupee has to break below 71.70 to extend the downmove to 71.60-71.55 and to avoid an immediate upmove above 72.
The Dollar Index (98.27) is holding above 98 and can test 98.50. A strong break above 98.50, which looks more likely on the charts, can take the index further higher to 99.10 in the coming days.
Euro (1.1075) failed again to breach 1.11 decisively and has come-off again. The pair looks vulnerable to break the immediate support level of 1.1065 and fall to 1.1030-1.10 in the near term.
Dollar-Yen (106.43) continues to trade mixed and range bound between 106.15 and 106.7. On the intraday chart, the bias is bullish to see a break above 106.7 and a rise to 107 – the upper end of the broader 105.-107 range in the coming days.
EUR-JPY (118.05) retains its narrow 117.5-118.5 range and remains unclear in the near term. A breakout of this range will give a clear cue on the next move.
Aussie (0.6760) dipped as expected and has bounced from the low of 0.6745. This keeps the 0.6735-0.6835 sideways range intact. A rise to 0.6775 is likely and a break above it can take the Aussie higher to 0.68 and 0.6835 – the upper end of the range.
As expected, Pound (1.2235) has surged break above 1.22. While above 1.22, the short-term outlook is bullish to test 1.23 and 1.2330.
USDCNY (7.0958) has surged much beyond our expected 7.09 level. A crucial resistance is near current levels at 7.10 which need a watch. A pull-back from there can trigger a corrective fall to 7.07-7.069 in the coming days.
Dollar-Rupee (71.8150) has come-off from the high of 71.97 but has to break 71.70 to move down further towards 71.60-71.55. While above 71.70, the chances are high for it to breach 72 and rise towards 72.11-72.13 in the near term.
INTEREST RATES
The US Treasury yields have bounced sharply and may move further higher before resuming their overall downtrend. The outcome of the US Federal Reserve Chairman Jerome Powell’s speech today at the Jackson Hole Symposium will be the key in setting the direction of the yields. The German yields have also inched slightly higher and has room to move further higher within their overall downtrend. The 10Yr GoI looks mixed and can consolidate in a sideways range in the near term.
The US Treasury yields have risen sharply across tenors. The 2Yr (1.62%) was up sharply by 8 bps, the 5Yr (1.52%) and 10Yr (1.62%) were up 5 bps and 4 bps respectively while the 30Yr (2.14) was up 6 bps. The expected fall in the yields looks to be getting delayed. The 30Yr has an immediate resistance at 2.17. A strong break above it can see a further rise to 2.24% before the overall downtrend resumes.
The Germans yields have also inched higher. The 2Yr (-0.88%), 5Yr (-0.87%) and 30Yr (-0.11%) were up 2 bps each while the 10Yr (-0.65%) was up 1 bps. The 30Yr has bounced very well from -0.20% and can test -0.08% and -0.07% in the near term. The 10Yr looks mixed and has been consolidating within the overall downtrend between -0.64% and -0.69%.
The 10Yr GoI (6.5612%) is stuck in between 6.53% and 6.60% over the last couple of days. As mentioned yesterday, we expect the 10Yr GoI to remain range bound between 6.52% and 6.65% for some time.
